Longview Equity Fund, L.P. v. iWorld Projects & Systems

The opinion of the court was delivered by: Richard J. Sullivan, District Judge

MEMORANDUM AND ORDER

Plaintiffs Longview Equity Fund, L.P. and Longview International Equity Fund, L.P. (collectively "Plaintiffs") bring this action against defendants iWorld Projects and Systems, Inc. ("iWorld") and Robert Hipple (collectively "Defendants"). Plaintiffs assert four claims against defendant Hipple: (1) violations of Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b) (the "Exchange Act"), and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder; (2) control person liability pursuant to Section 20(a) of the Exchange Act; (3) common law fraud under New York law; and (4) breach of representation under New York law. Defendant Hipple now moves for summary judgment on all four claims.

For the reasons that follow, the Court construes Hipple's motion as seeking a change of venue, judgment on the pleadings, and summary judgment. Hipple's motion for a change of venue is denied. Hipple's motion for judgment on the pleadings as to the breach of representation claim is granted. In all other respects, Hipple's motions are denied.

I. BACKGROUND

The complaint in this case was originally filed on July 27, 2005. The case was reassigned to the undersigned from the Honorable Kenneth M. Karas, District Judge, on September 4, 2007.

On December 12, 2007, the Court held a conference to address certain outstanding pretrial issues. At this conference, defendant Hipple requested permission to file a motion for summary judgment, noting that he had not previously been permitted to do so. By order dated December 18, 2007, the Court instructed Hipple to file his summary judgment motion by January 22, 2008. In that order, the Court advised Plaintiffs that they need not respond to the summary judgment motion unless directed to by the Court.

On January 29, 2008, the Court held a pre-trial conference, at which time the Court entertained limited oral argument on Hipple's summary judgment motion and reserved judgment. (See generally Transcript of January 29, 2008 Conference ("Jan. 29 Tr.")).

It should be noted that, although iWorld has previously appeared in this matter, iWorld has indicated that it cannot afford to hire an attorney to defend itself in this action, and does not plan on appearing for trial. (See Jan. 29 Tr. at 2-4.) An order to show cause on a default judgment against iWorld is currently pending.

II. STANDARD OF REVIEW

The standard for summary judgment in this Circuit is well-established. Summary judgment is only appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The Court is to "resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought." Patterson v. County of Oneida, N.Y., 375 F.3d 206, 219 (2d Cir. 2004); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The court "is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments." Amnesty Am. v. Town of West Hartford, 361 F.3d 113, 122 (2d Cir. 2004) (quoting Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996)); see also Rivkin v. Century 21 Teran Realty LLC, 494 F.3d 99, 103 (2d Cir. 2007). "Conclusory allegations, conjecture and speculation . . . are insufficient to create a genuine issue of fact." Kerzer v. Kingly Mfg., 156 F.3d 396, 400 (2d Cir. 1998) (citation omitted). However, "if `there is any evidence in the record from any source from which a reasonable inference in the [nonmoving party's] favor may be drawn, the moving party simply cannot obtain a summary judgment.'" Binder & Binder PC v. Barnhart, 481 F.3d 141, 148 (2d Cir. 2007) (quoting R.B. Ventures, Ltd. v. Shane, 112 F.3d 54, 59 (2d Cir. 1997)) (alteration in original).

"[W]here the nonmoving party will bear the burden of proof at trial, Rule 56 permits the moving party to point to an absence of evidence to support an essential element of the nonmoving party's claim." Bay v. Times Mirror Magazines, Inc., 936 F.2d 112, 116 (2d Cir. 1991) (citations and internal quotations omitted). In such a case, the plaintiff must "come forth with evidence sufficient to permit a reasonable juror to return a verdict in his or her favor on that element" in order to withstand summary judgment. Burke v. Jacoby, 981 F.2d 1372, 1379 (2d Cir. 1992) (citations omitted). If plaintiff fails to do so, summary judgment is appropriate. Id.

Hipple's first argument is that venue is improper in this Court. (See Hipple Mem. at 4.) Hipple asserts that venue in New York is improper because "none of the conduct alleged as the basis for any securities fraud occurred in or was connected to New York." (Id. (emphasis in original).) He also asserts that he is not bound by the forum selection clause in the Subscription Agreement, dated March 31, 2005 (the "Agreement"), despite the fact that he negotiated and signed the Agreement in his official capacity as Chief Executive Officer of iWorld, because the language of the clause does not govern this dispute. (See Jan. 29 Tr. at 17.) Plaintiffs respond that (1) the Agreement, which underlies the dispute, contains provisions pursuant to which the parties consented to jurisdiction in New York; (2) the attorneys who represented Plaintiffs in connection with the agreement were located in New York; and (3) in any event, defendant Hipple has waived any argument related to venue by voluntarily appearing in this action. (See Jan. 29 Tr. at 14-16.)

In keeping with the court's duty to interpret pro se filings "to raise the strongest arguments that they suggest," McPherson, 174 F.3d at 280, the Court interprets Hipple's arguments pertaining to venue as a motion pursuant to 28 U.S.C. § 1404(a) to transfer the case from the Southern District of New York to the Middle District of Florida. (See Hipple Mem. at 5); see also Kolko v. Holiday Inns, Inc., 672 F. Supp. 713, 716 (S.D.N.Y. 1987) ("Section 1404(a) sets no time limit at which a motion to transfer may be made."). Plaintiffs' arguments regarding waiver "are thus inapposite." Montgomery v. Tap Enters., Inc., No. 06 Civ. 5799 (HB), 2007 WL 576128, at *3 n.7 (S.D.N.Y. Feb. 26, 2007). However, Hipple's motion is denied because, for the reasons that follow, venue is proper in the Southern District of New York.

Section 1404(a) provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). Motions for transfer lie within the broad discretion of the district court and the court should consider notions of convenience and fairness on a case-by-case basis. D.H. Blair & Co., Inc. v. Goltdiener, 462 F.3d 95, 106 (2d Cir. 2006) (citing In re Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir. 1992)). The burden of demonstrating that the action should be transferred to another district lies with the moving party. Id. In considering such a motion, the court must determine first whether the case could have been brought in the proposed transferee district. Reliance Ins. Co. v. Six Star, Inc., 155 F. Supp. 2d 49, 56 (S.D.N.Y. 2001). The court must then determine, pursuant to a host of factors, whether transfer is appropriate. D.H. Blair, 462 F.3d at 106. These factors include: "(1) the plaintiffs' choice of forum, (2) the convenience of witnesses, (3) the location of relevant documents and relative ease of access to sources of proof, (4) the convenience of parties, (5) the locus of operative facts, (6) the availability of process to compel the attendance of unwilling witnesses, and (7) the relative means of the parties." Id. at 106-07.

An additional factor to consider is the existence of a forum selection clause. In New York, forum selection clauses "are prima facie valid absent a showing they were signed as a result of fraud or overreaching, that they are unreasonable or unfair, or that enforcing them would contravene a strong public policy of the forum." Orix Credit Alliance, Inc. v. Mid-South Materials Corp., 816 F. Supp. 230, 233 (S.D.N.Y. 1993) (citing The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972)). Forum selection clauses are properly considered as an additional factor in a § 1404 analysis. Id. ("A motion to transfer under § 1404(a) is governed by the terms of the statute itself, and a court should consider the preferences of the parties, as embodied in a contractual forum selection clause, only to the extent that the federal statute itself permits."); see also Stewart Org. Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988) ("The presence of a forumselection clause such as the parties entered into in this case will be a significant factor that figures centrally in the district court's calculus [in deciding a motion to transfer]."). "However, as Stewart makes clear, the existence of a mandatory forum-selection clause does not by itself dispose of a motion to transfer under § 1404(a)." Interested London Underwriters v. Kelly Global Logistics, Inc., No. 06 Civ. 5845 (PKL), 2008 WL 558038, at *6 n.9 (S.D.N.Y. Feb. 29, 2008) (citing Stewart, 487 U.S. at 32).

The Court first finds that this action could have been brought in the Middle District of Florida, where Hipple resides. See 28 U.S.C. § 1391(a). However, the Court declines to transfer the case at this point because an analysis of the D.H. Blair factors does not weigh in favor of a transfer. The Southern District of New York is Plaintiffs' choice of forum, and there appear to be no witnesses who are unwilling to travel to the Southern District of New York. Nor does the location of relevant documents or the locus of operative facts favor one jurisdiction over another. Perhaps most importantly, Hipple appears to have himself consented to this venue. A copy of the Subscription Agreement at issue in this case, dated March 31, 2005 (the "Agreement"), was submitted to the Court as part of Plaintiffs' previously filed motion for summary judgment.*fn1 (See Affidavit of Wayne Coleson ("Coleson Aff.") ¶ 4, Ex. A.) The Agreement contains a broad forum selection clause:

Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York. The parties and the individuals executing this Agreement and other agreements referred to herein or delivered in connection herewith on ...

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